After a busy week so far in terms of economic releases, today’s calendar is relatively sparse with no major data points out of the UK. In light of no new fundamental developments, the markets are in a sanguine mood this morning with the FTSE 100 and pound slightly softer as attention now turns to tomorrow’s employment report from the US
EasyJet loses altitude
Budget airline easyJet (LON:EZJ) is stuck at the bottom of the UK blue-chip index this morning after declining almost 6% following the release of its latest trading update. The fall comes despite the release showing record passenger numbers for easyJet in the three months to September 30th, in what has has been a challenging quarter for the low-cost carrier. Major external shocks such as the Brexit vote and terror attacks have weighed on performance and the high number of passengers has only been achieved by slashing prices, with revenue per seat compared to the same period last year falling by 8.7%.
The outlook going forward has also been revised downward in a development that may be a cause for concern amongst investors who have seen the share price decline by almost half in the past year. Another adverse factor affecting the firm has been the drop in the pound, with exchange rate movements now forecast to wipe £55 million off the company’s bottom line - £10 million more than was previously forecast.
However it’s not all doom and gloom for the stock going forward and shareholders may take solace in the fact that despite the exogenous shocks the company has still delivered impressive growth. Due to previously deferred tax liabilities the effective tax rate for the year will now be in the low double digits and with CEO Carolyn McCall remaining committed to declaring a dividend based on a payout ratio of 50% of post-tax income, the recent drop in altitude could be viewed as little more than turbulence and the stock may be flying high once more in the not too distant future.
Banks continue to enjoy a strong week
After a challenging month or so for the banking sector, this week’s rally will come as a welcome relief to investors with RBS (LON:RBS), Barclays (LON:BARC) and Lloyds (LON:LLOY) all adding to recent gains this morning. The strong performance amongst the financial sector has softened the blow from falling airline stocks and sees the index overall trade mildly lower by 9 points at the time of writing. As well as airline, retail shares are in the red today with Tesco (LON:TSCO) giving back some of yesterday’s strong rally and Sainsbury also lower.